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Allowable Expenses for Landlords

When completing your tax return, you can deduct some of the costs associated with being a landlord from the profit you make. You obviously don’t want to pay more tax than necessary, but you also need to make sure each expenses claim is allowable and treated correctly. In this article, we’ll look at common expenses you can claim as a landlord.

How expenses work

The purpose of a business expenses claim is to reduce the amount of your rental income that you need to pay tax on. For example, you if made £10,000 in rental income and your allowable expenses totalled £3,000, you’d only pay tax on £7,000 profit.

However, there are strict rules on what you can claim as an allowable expense. For a cost to be allowable it must have come about exclusively for the purposes of renting out the property. For this reason, it’s important to stay on top of your record keeping and keep all your receipts digitally.

What can you claim for as a landlord?

It would be impossible to write an exhaustive list of landlord expenses. If you’re unsure if you can claim a particular item as a business expense, you should check with your accountant, as they will be familiar with your particular business and circumstances. Of course, there are some items that will apply to most landlords, and here are some examples of what you might be able to claim:

General maintenance and repairs

You can claim for repairs to the property, but not for improvements. You could, for example, claim for the like for like replacement of a broken fixture, but not for an upgrade.

Utility bills

You can claim for any bills that the tenants are not responsible for. This could include ground rent, council tax, gas and electricity and service charges if you’re sub-letting.

Fees for services

If you hire someone to work in your property you can claim for their fees. This includes workers like gardeners, cleaners, plumbers and builders - as long as the work counts as a repair rather than an improvement.

Professional services

Services like accountancy, conveyancing, interior design and solicitor’s fees relating to debt collection could all be claimed as allowable expenses. MTD-compatible bookkeeping software will be an allowable expense if you pay for this separately from your accountancy fees.

Direct running costs

You can claim for general business costs like phone and broadband, office equipment and stationery. The costs of marketing your property, including fees to the letting agent, photography and advertising are also allowable.

Replacement of domestic items

You can’t claim for the initial cost of domestic items like furniture, curtains, carpets, TVs, white goods or kitchenware, but you can claim for the cost of replacing them. This relief is only available on items that have been provided solely for use by the tenant.

The original item must no longer be available, and relief is limited to like-for-like replacements. If a “better” item is supplied, relief is capped at the cost of replacing the original item. An element of judgement may be necessary here, particularly if the original item was purchased a long time ago.

Improvements versus repairs

As we’ve mentioned already, repairs to your property can be claimed as an expense, but you can’t claim for improvements. Instead, the cost of improvements can be claimed against CGT when you come to sell the property. For example, the cost of adding a conservatory for £30,000 wouldn’t be put through as an allowable expense to reduce your rental profit, however it would go against reducing the gain on the property when you sell it.

Insurance

All your landlord insurance policies are allowable, including buildings, contents, liability and cover for potential loss of rent.

If you have questions or if we can help in any way, please call our expert team on 01296 489242 or email info@orangegenie.com.

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